
This comprehensive guide will walk you through filing crypto taxes in Estonia, covering everything from understanding how crypto is taxed to choosing the right accounting method and ensuring compliance with the Estonian Tax Authority (MTA).
How is Crypto Taxed in Estonia?
In Estonia, regular taxpayers like us are subject to crypto taxation, which is based on income derived from various cryptocurrency activities. Taxable transactions encompass activities such as trading, converting cryptocurrency into fiat or other cryptocurrencies, and using cryptocurrency for purchasing goods or services. Income from cryptocurrency mining is categorized as business income. Additionally, any taxable income received in cryptocurrency, such as rent, interest, and business income, is liable to income tax.
According to a ruling by the Court of Justice of the European Union, exchanging virtual currency for traditional currency and vice versa is considered a service for consideration and is exempt from VAT. However, transactions involving non-traditional currencies are treated as financial transactions if parties accept them as alternatives to legal tender.
Income can be generated through various means, including price changes during sales or exchanges, making payments with crypto, engaging in mining, and renting computer data. Activities that are not subject to taxation include donating, purchasing cryptocurrency with fiat, transferring between wallets, and giving cryptocurrency as a gift.
Profits from cryptocurrency transfers, including exchanges, are liable to income tax and are taxed at a fixed rate of 20%. The taxable gain is determined by the difference between the selling and purchase prices or the value of the received property and the cryptocurrency's purchase price. Unfortunately, losses incurred from cryptocurrency exchanges cannot be claimed as deductions for tax purposes.
Cryptocurrency is classified as property, and any taxable income generated must be disclosed in the income tax return. Each transfer transaction, including exchanges, is treated as a distinct taxable entity. When dealing with cryptocurrency exchanges involving traditional currency, it is necessary to convert the amounts into euros using the market rate prevailing on the date of receipt.
Can The MTA Track Crypto?
Being an EU member state, Estonia has access to KYC details and transaction records from all crypto-related services, thanks to regulations like AMLD-6 and DAC-8. The MTA can track crypto transactions easily and identify discrepancies in tax reports. It's crucial to report all transactions to the MTA to avoid potential issues with the tax authority.
Knowing which Crypto Transactions are Taxed in Estonia
In Estonia, the taxman comes knocking for various crypto activities, including selling crypto for fiat, swapping one crypto for another, using crypto for purchases, making and staking crypto, and earning crypto as income. On the flip side, certain moves, like donating crypto, swapping fiat for crypto, transferring crypto between wallets, and giving crypto as a gift, are tax-free.
Choosing the Right Accounting Method
When dealing with multiple crypto assets at different prices, choosing the right accounting method becomes essential. In Estonia, the Tax Authority allows two methods: FIFO (First-In-First-Out) and Weighted Average Accounting. FIFO uses the acquisition price of the first asset bought as the cost basis for the latest disposal, while the Weighted Average Method considers the average acquisition price of all assets at the time of disposal.
When To Report Crypto Taxes in Estonia
Residents in Estonia have until April 30th (or May 2 for the year 2024) of the following year to submit their tax returns. Electronic filing opens on February 15th, offering a digital route for tax reporting. Self-employed individuals must also make advance tax payments on specific deadlines.
How to File Crypto Taxes in Estonia
When it comes to filing your taxes in Estonia, you've got three hassle-free options:
- File your taxes online through the user-friendly e-MTA portal. Just make sure you have a government-authorized ID card, a Mobile-ID, a smart ID, or an e-ID from an EU country.
- Send your tax info via post to the Tax and Customs Board’s Service Bureau.
- Keep it simple with good old-fashioned paper forms.
And to guide you through the e-MTA portal, check out the video tutorial once you've logged in.
When you're reporting profits from your cryptocurrency transactions on your tax return, refer to either table 6.3 or 8.3, labeled "Transfer of other property."
If the platform you used for crypto transactions is based in Estonia, record the transactions in Table 6.3. For platforms registered elsewhere, note the transactions in Table 8.3. In the table, specify "cryptocurrency" as the type of property.
Include the purchase cost and any associated expenses for the transfer, along with the sales or market price. The purchase cost is the value of the bought cryptocurrency in euros at the time of purchase, while the sales or market price is the cryptocurrency value in euros at the time of sale or exchange.
What Records will the MTA Want?
To ensure a smooth tax filing experience, maintain detailed records of all transactions, acquisition prices, disposals, fair market values of tokens, and details of the type of asset bought, sold, exchanged, or traded.
Why Stress when you can file your crypto tax using Kryptos?
Now that you understand how crypto transactions are taxed and the necessary forms for your tax report, let's break down the user-friendly steps to streamline this process using Kryptos:
- Head over to Kryptos and sign up using your email or Google/Apple Account.
- Select your country, currency, time zone, and accounting method.
- Import all your transactions from wallets and crypto exchanges.
- Choose your preferred report and click on the "generate report" option on the left side of your screen, allowing Kryptos to handle all the accounting for you.
- Once your tax report is ready, easily download it in PDF format.
For any questions about integrations or generating your tax reports, check out our helpful video guide here.
FAQs
1. How does Estonia tax cryptocurrency transactions?
In Estonia, cryptocurrency transactions are subject to taxation based on various activities such as trading, converting crypto to fiat or other cryptocurrencies, and using crypto for purchases. Income from mining is considered business income, and taxable income received in cryptocurrency, like rent or interest, is subject to income tax.
2. Which crypto transactions are taxable in Estonia?
Taxable crypto activities in Estonia include selling crypto for fiat, swapping one crypto for another, using crypto for purchases, mining, and earning crypto as income. Conversely, donating crypto, transferring between wallets, and giving crypto as a gift are tax-exempt.
3. What are the accepted accounting methods for crypto taxation in Estonia?
Estonia allows two accounting methods for crypto taxation: FIFO (First-In-First-Out) and Weighted Average Accounting. FIFO bases the cost on the first asset bought, while Weighted Average Method considers the average acquisition price of all assets at disposal.
4. When is the deadline for reporting crypto taxes in Estonia?
Residents of Estonia must report their crypto taxes by April 30th (May 2nd for the year 2024) of the following year. Electronic filing opens on February 15th, offering a convenient digital route for tax reporting, while self-employed individuals have specific deadlines for advance tax payments.
5. What records are required for filing crypto taxes in Estonia?
To ensure compliance, maintain detailed records of all crypto transactions, including acquisition prices, disposals, fair market values, and type of assets involved. These records are crucial for a smooth tax filing experience and to satisfy the requirements of the Estonian Tax Authority.
All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!
Step | Form | Purpose | Action |
---|---|---|---|
1 | 1099-DA | Reports digital asset sales or exchanges | Use to fill out Form 8949. |
2 | Form 1099-MISC | Reports miscellaneous crypto income | Use to fill out Schedule 1 or C. |
3 | Form 8949 | Details individual transactions | List each transaction here. |
4 | Schedule D | Summarizes capital gains/losses | Transfer totals from Form 8949. |
5 | Schedule 1 | Reports miscellaneous income | Include miscellaneous income (if not self-employment). |
6 | Schedule C | Reports self-employment income | Include self-employment income and expenses. |
7 | Form W-2 | Reports wages (if paid in Bitcoin) | Include wages in total income. |
8 | Form 1040 | Primary tax return | Summarize all income, deductions, and tax owed. |
Date | Event/Requirement |
---|---|
January 1, 2025 | Brokers begin tracking and reporting digital asset transactions. |
February 2026 | Brokers issue Form 1099-DA for the 2025 tax year to taxpayers. |
April 15, 2026 | Deadline for taxpayers to file their 2025 tax returns with IRS data. |
Timeline Event | Description |
---|---|
Before January 1, 2025 | Taxpayers must identify wallets and accounts containing digital assets and document unused basis. |
January 1, 2025 | Snapshot date for confirming remaining digital assets in wallets and accounts. |
March 2025 | Brokers begin issuing Form 1099-DA, reflecting a wallet-specific basis. |
Before Filing 2025 Tax Returns | Taxpayers must finalize their Safe Harbor Allocation to ensure compliance and avoid penalties. |
Feature | Use Case Scenario | Technical Details |
---|---|---|
Automated Monitoring of Transactions | Alice uses staking on Ethereum 2.0 and yield farming on Uniswap. Kryptos automates tracking of her staking rewards and LP tokens across platforms. | Integrates with Ethereum and Uniswap APIs for real-time tracking and monitoring of transactions. |
Comprehensive Data Collection | Bob switches between liquidity pools and staking protocols. Kryptos aggregates all transactions, including historical data. | Pulls and consolidates data from multiple sources and supports historical data imports. |
Advanced Tax Categorization | Carol earns from staking Polkadot and yield farming on Aave. Kryptos categorizes her rewards as ordinary income and investment income. | Uses jurisdiction-specific rules to categorize rewards and guarantee compliance with local tax regulations. |
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Handling Complex DeFi Transactions | Eve engages in multi-step DeFi transactions. Kryptos tracks value changes and tax implications throughout these processes. | Manages multi-step transactions, including swaps and staking, for comprehensive tax reporting. |
Real-Time Alerts and Updates | Frank receives alerts on contemporary tax regulations affecting DeFi. Kryptos keeps him updated on relevant changes in tax laws. | Observe regulatory updates and provide real-time alerts about changes in tax regulations. |
Seamless Tax Reporting Integration | Grace files taxes using TurboTax. Kryptos integrates with TurboTax to import staking and yield farming data easily. | Direct integration with tax software like TurboTax for smooth data import and multi-jurisdictional reporting. |